SC Appeals Court Upholds Restrictive Covenant Prohibiting Rental of Units to College Students Unrelated to Owner

Sunil V. Lalla and Sharon W. Lalla, were co-owners of a unit in a horizontal property regime known as The SPUR at Williams Brice Stadium (The SPUR). The Lallas appealed the circuit court’s order allowing The SPUR to enforce a restrictive covenant prohibiting the Lallas from renting their unit to any student currently enrolled in a two or four-year college. The Lallas argued the restriction had no reasonable basis and discriminates against a specific class of individuals, and that the circuit court erred in failing to hold the restrictive covenant null and void.

At the outset, the court noted that the covenant was binding because when the Lallas became owners of a unit in The SPUR, they voluntarily and intentionally bound themselves to the regulations set forth in these bylaws and in the Master Deed. As an affirmative defense, the Lallas first argued the rental restriction was impermissibly discriminatory and violated the Equal Protection Clauses of article I, section 3 of the South Carolina Constitution and the Fourteenth Amendment of the United States Constitution. The court found that the rental prohibition was rationally related to its purpose because it barred from the pool of possible renters a population that the Association alleged has a tendency to engage in certain behaviors dangerous to themselves and disruptive to those around them. The fact that some potential renters barred by the college student prohibition might not be disruptive or disorderly did not render the classification itself arbitrary or constitutionally violative. Accordingly, the court held that the restrictive covenant satisfied both the federal and state equal protection clauses because it was “rationally related to maintaining the safety, comfort, and investment of owners.”

The court next rejected the Lallas’ Fair Housing Act argument, since the rental restriction was unrelated to any classification protected by state and federal housing laws. The Lallas then claimed the change in economic conditions, specifically the decline in the real estate market following their purchase of the Unit, rendered enforcement of the restrictions unreasonable. The court likewise dismissed this contention, finding the units’ decrease in value due to the declining real estate market and economy had no effect on the Association’s need to minimize the risk that The SPUR might develop a dormitory-like atmosphere. Lastly, the court rejected the Lallas’ waiver argument, holding that even if the Association previously failed to monitor the rental of units, the record reflected that, upon receiving a complaint, the Association took action to enforce the restrictive covenant prohibiting rentals to unrelated college students. Thus, the circuit court’s enjoining of the Lallas from renting, or continuing to rent, their unit in violation of the restrictive covenant was affirmed.

SPUR at Williams Brice Owners Ass’n, Inc. v. Lalla, 415 S.C. 72 (2015), reharing denied (1/21/2016)